From time to time you’ll see me post links to videos from TED.com (Schwartz on incentives, Wallace on buying happiness, Lee on American Chinese food). I find a lot of their videos to be absolutely fascinating. Today I watched two videos I wanted to share with you all, one from a behavioral economist, Dan Ariely, and another from a psychologist, Dan Gilbert.
The first video was of a talk by Dan Ariely about cheating. Dan Ariely wrote Predictably Irrational, a book about how we all make predictably make irrational decisions and if you’ve read his book then his talk will be very familiar. His talk recaps his cheating experiment but adds a few anecdotes I don’t remember reading in the book.

I’ve embedded the second video below because I think it’s better (and more interesting because I was already familiar with Ariely’s experiment and his findings). It features Dan Gilbert, a Harvard psychologist, and how we determine “value” and the errors of our shifting comparisons. The video is 33 minutes long but well worth it because he goes into the various ways in which we miscalculate the value of things, from Presidents to Big Mac’s to lottery tickets.

If you’ve read Ariely’s book, you’ll recognize a lot of similarities in their findings (Gilbert’s example with the wine matches Ariely’s example with the newspaper delivery options). What’s also great is that Gilbert is a very entertaining and energetic speaker, which always makes for a good video.

If you make it to the end, around the 30 minute mark, you’re treated to a Q&A with Gilbert in which someone stands up and makes a point, albeit a bit contentiously, about lottery tickets and the $1 going towards enjoyment and anticipation, rather than for a financial payoff.

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Interesting video, I agree on the lotto point and he strikes me as the kind of guy who can talk about anything and convince you of his opinion. And unless I am starving to death a Big-Mac is not worth $25.

It is just like an addiction, except rather than the a product causing certain chemicals to be produced in your body, drugs do. Runners often crave the runner’s high and those are endorphins, Endorphins are powerful!

It looks like a good way to identify problems. Unfortunately, identifying all factors and then giving them their level of importance is impossible to do, especially when you get into feelings, anticipation and other non-concrete things.

For example, his evident prioritization over poverty over terror. On the individual level, it is easy to prioritize poverty over terror, because we can actually make a difference in poverty through our money, time and talents.

On the governmental level, it becomes much a much less cut and dry determination. How many resources should the government allocate to poverty and to the safety? What role should government play in poverty and safety? How well can government solve poverty or safety issues? What is the outcome of foresaking safety for poverty or vice versa?

In short, I think his answer to the moderators implied question of valuing safety to poverty to be lacking. He answers none of the above questions, nor any of the logical follow up questions.

Overall, though, I think the video was great. When applied to personal finance, it will help me make value decisions much more effectively – at least I hope they will.

I think his point about poverty and terror wasn’t that we are more able to fix poverty, but that poverty affects a greater number of people. We’ve spent a lot of money on combating terror and very little, relatively, on poverty.

I do think that the idea of choosing one or the other is ludicrous, you can work towards both and find a balance that meets your needs. I do agree that the fear of a terrorist attack is overblown compared to the statistics but I think being fearful is justified.

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